Management Information Systems

Chapter Ten

E-Commerce: Digital Markets, Digital Goods

Md. Golam KibriaLecturer, Southeast University

E-commerce and the Internet

• E-commerce today: – Use of the Internet and Web to transact

business; digitally enabled transactions

– Began in 1995 and grew exponentially, still growing even in a recession

– Companies that survived the dot-com bubble burst and now thrive

– E-commerce revolution is still in its early stages

THE GROWTH OF E-COMMERCE

Why e-commerce is different

UbiquityInternet/Web technology available everywhere: work, home, etc., anytime.

Effect: Marketplace removed from temporal, geographic

locations to become “marketspace” Enhanced customer convenience and reduced

shopping costs

Global Reach

The technology reaches across national boundaries, around Earth

Effect: Commerce enabled across cultural and national

boundaries seamlessly and without modification Marketspace includes, potentially, billions of

consumers and millions of businesses worldwide

Universal standardsOne set of technology standards: Technical standards of Internet Effect:

– Disparate computer systems easily communicate with each other

– Lower market entry costs—costs merchants must pay to bring goods to market

– Lower consumers’ search costs—effort required to find suitable products

RichnessSupports video, audio, and text messages

Effect: – Possible to deliver rich messages with text, audio,

and video simultaneously to large numbers of people

– Video, audio, and text marketing messages can be integrated into single marketing message and consumer experience

RichnessSupports video, audio, and text messages

Effect: – Possible to deliver rich messages with text, audio,

and video simultaneously to large numbers of people

– Video, audio, and text marketing messages can be integrated into single marketing message and consumer experience

Information densityLarge increases in information density—the total amount and quality of information available to all market participantsEffect:

– Greater price transparency– Greater cost transparency– Enables merchants to engage in price discrimination

Personalization/CustomizationTechnology permits modification of messages, goods

Effect– Personalized messages can be sent to individuals as

well as groups– Products and services can be customized to

individual preferences

Social technologyThe technology promotes user content generation and social networking

Effect– New Internet social and business models enable

user content creation and distribution, and support social networks

Types of e-commerceBusiness-to-consumer (B2C)

B2C involves retailing products and services to individual shoppers.

Example: Amazon.com

Business-to-business (B2B)

B2B involves sales of goods and services among businesses.

Example: ChemConnect.com

Consumer-to-consumer (C2C)

C2C involves consumers selling directly to consumers.

Example: eBay.com

E-commerce Business ModelsPortal

Portals offer powerful web search tools as well as an integrated package of content and services such as news, email, maps, and more, all in one place.

Example: Yahoo, Google

E-tailer

Online retail stores that sell product and services by using website.

Example: Amazon.com

Content Provider

Creates revenue by providing digital contents, such as news, music, photos, or video over the web.

Example: iTunes.com, Games.com

Transaction Broker

Saves users money and time by processing online sales transactions and generating a fee each time a transaction occurs.

Example: Etrade.com, Expedia

Market Creator

Market Creator provides a digital environment where buyers and sellers can meet, search for products, display products, and establish prices for those products.

Example: eBay

Community Provider

Provides an online meeting place where people with similar interasts can communicate and find useful information

Example: Facebook, MySpace

Service Provider

Provides Web 2.0 applications such as photo sharing, video sharing, and user generated content as services.

Example: Google Apps, Xdrive.com

E-commerce revenue models

Advertising Revenue Model

In the advertising revenue model, a Web site generates revenue by attracting a large audience of visitors who can then be exposed to advertisements.

Example: Yahoo.com

Sales Revenue Model

In the Sales Revenue Model, companies derive revenue by selling goods, information, or services to customers.

Example: Amazon.com

Subscription Revenue Model

In subscription model, a web site offering content or services charges a subscription fee for access to some or all of its offerings on an ongoining basis.

Example: Wall Street Journal

Free/ Freemium Revenue Model

In this model, firms offer basic services or content for free, while charging a premium for advanced or special features.

Example: Google, Pandora

Transaction Fee Revenue Model

A company receives a fee for enabling or executing a transaction.

Example: ebay, E*Trade

Affiliate Revenue Model

In the affiliate revenue model, Web sites send visitors to other Web sites in return for a refferal fee or percentage of the revenue from any resulting sales.

Example: MagicRooms Solutions